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2021-Q3 release of GTAS Forecasting model - Strong recovery followed by moderation
15 October 2021Tomasz Brodzicki
Key findings
We now predict the real value of global trade to go up
to USD 19,393 billion in 2021 and USD 19,929 billion in 2022.
Therefore, we now anticipate a year-on-year increase in the real
value of global trade by 8.5% in 2021 and 2.8% in
2022
The predicted CAGR for the period 2021-2030 equals
2.6%
We forecast the global merchandise trade volume to grow
to 14.9 billion metric tons in 2021 and 15.3 billion metric tons in
2022. It points to a recovery in the forthcoming years with
year-on-year growth rates of 6.8% in 2021 and 2.4% in
2022.
The forecasted CAGR for global trade volume stands at
2.4% in 2021-30
The estimated recovery is strong enough to allow a
trade to reach its pre-pandemic levels already in 2021 and
presently predicted higher CAGR over the period 2021-2035 is strong
enough for global trade to achieve a higher trajectory path of the
pre-pandemic trend (2011-2019) in the forecasted time
horizon.
Global uncertainty is declining, growth prospects are
positive, with growth rates predicted to moderate after the fast
recovery phase is over; nonetheless, there are some still ongoing
concerns: the further path of the COVID-19 pandemic, rising
transport costs including containerized freight, disrupted GVCs in
various key sectors, geopolitical tensions in several key
regions
2021-Q3 release of the GTAS Forecasting
models
The new release of the GTAS Forecasting model
accommodated the most recent macroeconomic forecasts from IHS
Markit Global Link Model, Q1 data for 2021 from the Global Trade Atlas (GTA) for
monthly reporting states, and updated COVID-response factors.
GTAS
Forecasting model now estimates the contraction of
global merchandise trade in 2020 to USD 17,871 billion or -5.5%
year-on-year.
We now predict the real value of global trade to go up
to USD 19,393 billion in 2021 and USD 19,929 billion in 2022.
Therefore, we now anticipate a year-on-year increase in the real
value of global trade by 8.5% in 2021 and 2.8% in 2022 (which is
+2.5% and -0.2%, respectively, in comparison to our Q2
forecasts).
It accommodates the recovery in global GDP in 2021 and a
powerful growth impulse in Q2 of 2021. The predicted CAGR
for the period 2021-2030 equals 2.6%, and for 2022-2035 equals 2.6%
(an increase by +0.2% and +0.3% respectively on prior release
results). It represents an upward adjustment in CAGR
compared to the prior release, driven mainly by adjustments of GDP
forecasts in the GLM model and better than initially expected
results for the first two quarters of 2021.
In terms of volumes, we estimate a contraction of global trade
in 2020 to 13.94 billion metric tons or by -4.2% year-on-year.
We forecast the global merchandise trade volume to grow
to 14.9 billion metric tons in 2021 and 15.3 billion metric tons in
2022. It points to a recovery in the forthcoming years with
year-on-year growth rates of 6.8% in 2021 and 2.4% in
2022.
The forecasted CAGR for global trade volume stands at
2.4% in 2021-30 and 2.2% over 2022-35 (an increase by +0.1% and
+0.2%, respectively, on prior release results). The
predicted growth rates over 2021-2030(5) are faster than CAGR over
the period 2011-19 (higher trajectory) predating the pandemic but
significantly lower than the growth rates in trade preceding the
financial crisis.
The estimated recovery is strong enough to allow a trade
to reach its pre-pandemic levels already in 2021 and presently
predicted higher CAGR over the period 2021-2035 is strong enough
for global trade to achieve a higher trajectory path of the
pre-pandemic trend (2011-2019) in the forecasted time
horizon.
Contributing factors
The ongoing COVID-19 pandemic
The reaction in trade in 2020 was to a large extent consistent
with the escalating global COVID-19 pandemic and steps taken by
individual countries/territories in controlling or mitigating it.
The overall impact of COVID-19 on global trade and the global
economy will depend on the duration, severity, and spatial
distribution of the pandemic and directly and directly linked to
the severity of containment efforts taken by individual states. It
seems that with the duration of the pandemic, governments and
international organizations learned to react to it and mitigate it
in a more balanced and less harmful for their economies way. The
health crises create problems both on the supply side (e.g., due to
lockdowns, forced production stoppages, disrupted global value
chains) and demand-side (e.g., lower consumer confidence, delayed
consumption, lower incomes). The impact of COVID-19 on the global
economy clearly outweighed the prior outbreaks of SARS or MERS and
resembles more the effect of the infamous Spanish Flu of
1918-20.
Recent econometric analysis on monthly processed bilateral trade
flows by the GTAS Forecasting team has shown that COVID-19
still exerts an adverse impact on international trade flows;
however, the effect is slowly diminishing in magnitude (it
is observed both for new cases, new deaths, as well as COVID-19
monthly average of daily Oxford's Government Response Tracker on
the stringency of response to the pandemic by individual
states).
The cumulative number of confirmed cases of COVID-19
globally by 26 September 2021 reached 231.4 (and is likely to get
250 million cases threshold by November 2021) and 4.74 million
deaths. The cumulative number of cases is currently the largest in
Asia (75.2 million), Europe (58.9 million), North America (51.6
million), and South America (37.7 million).
The 2-week moving averages of global new cases globally started
to decline by mid-August 2021, with international average death
rates following with a two-week delay; it seems that the
peak of the fourth wave is behind us, and the number of
restrictions is subsiding; thus, the impact on global trade is
weakening
The reported number of vaccinations by the end of
September globally reached 6.18 billion with 2.67 billion people
fully vaccinated (with two doses or equivalent one dose), which is
equal to 33.2% of the global population; to bust immunity,
some countries, most advanced, started to distribute the third dose
mostly among the population aged 50+. The inequalities in
vaccination levels and rates observed are the area of significant
concern as a pandemic is global and needs to be globally resolved.
The size of the non-vaccinated population increases the chances of
the emergence of new potentially more hostile variants of the
virus. The pace of vaccination globally is a significant
concern as we are still far from the herd immunity
threshold.
Good overall growth prospect with peak of the
recovery behind
The most recent real GDP growth forecasts from IHS Markit were
published on 15 September 2021 and are based on the baseline
scenario of the impact of COVID-19 on the global economy and rising
global concerns over inflation and the presence of increasing
once-again GVCs disruptions
The now estimated contraction in real global GDP is -3.4% in
2020, varying between -4.5% for advanced, -1.6% for emerging, and
-5.1% for the most affected developing economies. Real global GDP
contracted in every quarter of 2020, with Q2 being the worst
quarter for the global economy in years. In contrast to prior
crises, advanced countries were more affected than the emerging
markets and started recovering later, thus taking their role in the
global economy. The impact on global trade relations was more
significant.
We now foresee a global recovery in 2021, with
year-on-year real GDP growth rates predicted to reach
5.6%.The growth rates are expected to vary between
5.1% (4.1% in 2022) for advanced, 6.5% (5.1%) for emerging, and
4.1% (5.0%) for developing states.
In Q2 2021, real global GDP is estimated to have grown by 11.5%,
with the growth impulse stronger for advanced (12.3%) than emerging
economies (10.2%). The prospects for Q3 and Q4 are positive, with
growth rates moderating to 4.7% and 4.2% (lowered in comparison to
prior forecasts from August), with growth more robust overall in
advanced economies (this should continue till Q2 of 2022).
Global Uncertainty falling
The monthly index of Global Economic Policy Uncertainty is
continuously declining after reaching its historically highest
levels in 2020. The fall in the 12-month average followed. It could
positively affect global demand as well as an investment decision
by firms boosting growth rates.
High transport costs
In our GTAS forecasting model, the prices of crude oil and
natural gas approximate transport costs. It is clear that the price
has reached the highest levels in the last six years thus rising
overall transport costs.
The rising cost can put negative pressure on global
trade, further aggravating disruptions of already existing global
value chains. The hike in prices is due to reduced supply and
enormously increasing demand. Due to the coming winter
season in the northern hemisphere and thus the increased demand in
the heating season, natural gas prices are unlikely to decrease
soon.
The containerized freight index from China to different
destinations globally, as shown by the Shanghai Shipping Exchange,
clearly points to skyrocketing costs of containerized
shipments. For the example of transport costs to the
Persian Gulf and Red Sea regions, it is clear the cost of
containerized transport climbed sharply compared to the
pre-COVID-19 period. They are unlikely to return to moderate levels
in the foreseeable future.
The rise in container transport costs is only partially related
to rising fuel prices. It is also due to problems with supply for
containers (global shortage of containers), still significant
congestion in many seaports, particularly in China, still existing
restrictions due to COVID-19, and growing global demand in the
recovery phase from the pandemic. The present delays in transport
with increased transport costs will further adversely affect many
already stretched global value chains. The longer the
problem lasts, the more likely are more serious adjustments to the
existing value chains concerning both trade routes and production
location (more backshoring and more nearshoring could be
expected).
The rising transport costs could, to some extent, impact the
global prices, increasing chances for another hike in global
inflation levels.
PMI New Export Orders readouts point to rising
optimism, at least in the short-run
PMI New Export Orders (adjusted) by IHS Markit is an excellent
trade predictor in the coming quarter. The 50.0 points is a
benchmark value with a value above pointing to recovery and below
indicative of contraction. The analyses performed show a
high correlation between PMI NExO and changes in GTA monthly data
reported by states over the coming quarter (mostly the following
month).
PMI NExO in August 2021 for global manufacturing (50.97)
is above, and global services are below (49.52) the 50.0
points. The adjusted PMI new exports orders (PMI NExO)
readouts for the worldwide manufacturing industry in August 2021
were above the benchmark value the 12th month in a row showing a
sustained recovery and pointing to a positive short-term outlook
for global trade. However, PMI NExO for global services fell for
the second time in more than half a year and, the manufacturing PMI
NEx0 decreased for the third time in a row. Taking these values
into account, we can assume that global trade is going to
grow more moderately in the forthcoming quarters.